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Troubled investments and troubled sales equate to a troubled HTC

Taiwan's HTC Corp. (TPE:2498) is in trouble.  Struggling in global sales and a $40M USD hit from its failed OnLive cloud gaming investment, the Taiwanese OEM posted dreary financials for Q3 2012.

Revenue came in at T$70.2B ($2.40B USD), while profit came in at T$3.9B ($133.1M USD).  While over one hundred million in profit would be good news for many firms, you only need to glance at HTC's results to see the disturbing trend that has unfolded over the past several quarters:

HTC

HTC did have some success on the quarter.  It launched the HTC One X+, a beefed up version of its Android flagship device.  It also announced the 8S and 8X Windows Phone 8 smartphones, which it claims Microsoft Corp. (MSFT) considers the "hero product" of the Windows Phone platform.

Also in the good news category HTC reduced its excess inventory.  And it made a bold $35M USD investment in Magnet Systems, a U.S. firm which HTC describes as "the creator of next-generation software platform for [the] mobile enterprise market."

But in the bad news category, HTC's gross margin -- a measure of return on sales -- has slid from 28 percent to 25 percent in the last year.  And HTC's slumping earnings have forced it to cut R&D spending by 15 percent, cut advertising/marketing by nearly 45 percent, and cut administrative overhead by 30 percent.

HTC quietly brilliant
Struggling phonemaker HTC will be a lot more "quietly" brilliant: it's cutting its marketing spending by approximately 40 percent. [Image Source: Reuters]

Such cuts can be a double-edged sword.  On the one hand they may help HTC's financials in the short term.  On the other hand, cutting your marketing budget nearly in half and making substantial cuts to your R&D budget can hurt revenue in the long terms as customers will be less aware of your product and your product won't be as cutting edge.

Amid a slumping global economy HTC predicted an even worse holiday Q4 2012.  It expects revenue of T$60B ($2.05B USD) and a gross margin of 23.0 percent.  That's approximately 40 percent less revenue than HTC made last holiday season.

Source: HTC



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By drycrust3 on 10/26/2012 4:17:13 PM , Rating: 2
Maybe one option for them is to allow a purchaser the option to download their own choice of OS. That way they don't need to actually supply two (or more) "same phone, different OS" phones with all the carry on that goes with that (different boxes, different instruction manuals, different helpdesks, etc. For example, say that when the phone arrives at the store it has a very basic "phone and text" OS (avoids unnecessary holdups when imported), then at the time of purchase the purchaser is given a free upgrade to one of several choices of OS, e.g. decides whether they want Android 4 or Windows Phone 8, then the sales person installs the requested OS, downloads some courtesy features e.g. music for Windows 8 or some useful apps for Android, checks it works ok with the customer's SIM card, and customer leaves store happy.


"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer














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